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TMI Blog2016 (8) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the petitioner or any of his brothers before finalizing the alleged liability of deceased after his death. In fact highhandedness on the part of respondents is writ large from the fact that they did not keep on informing petitioner or his legal brothers but petitioner has to collect correct information by approaching respondents under RTI Act and not otherwise. This clearly shows a hide and seek approach, patently erroneous and malicious in law, on the part of respondents in appropriating assets of petitioner in respect of certain dues which were not shown to be adjustable there against. It is a clear case of patent illegality, unauthorized appropriation, and unfair and unjust treatment made by the respondents to the petitioner in depriving him his huge amount which in law was refundable to him. The action on the part of respondents also comes within the ambit of patent abuse of process of law. Writ petition is allowed. The entire amount of petitioner which was appropriated by respondent is directed to be refunded with interest at the rate of 12% per annum from the date the amount was seized till repayment to petitioner. The order dated 17.08.2011 passed by CCIT upholdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Commissioner of Income Tax, Ghaziabad (hereinafter to be referred as the 'CIT') vide letter dated 18.04.2006 informed petitioner that out of total cash seized from petitioner, i.e. ₹ 2,15,12,000/- an amount of ₹ 72,72,524/- was appropriated against demand from one Ambrish Kumar Jain and ₹ 46,149/- was appropriated against demand from petitioner and ₹ 70 lacs and ₹ 1 lac were appropriated towards advance tax for Assessment Years (hereinafter to be referred as 'A.Y.') 2005-06 and 2006-07, respectively. 8. It is pleaded that petitioner had no business or commercial relation with Sri Amrish Kumar Jain. He (Amrish Kumar Jain) happens to be a distant relative. Petitioner never held or holds any money for, and on account of Sri Amrish Kumar Jain, hence, appropriation of ₹ 72,72,524/- from the funds of petitioner against demand from Amrish Kumar Jain was patently illegal. Petitioner thus filed objection/ protest against such appropriation vide letters dated 27.05.2006 and 12.06.2006. He also requested authorities concerned to refund ₹ 72,72,524/- along with interest vide representation dated 07.03.2007. Petitioner again filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that no appropriation from P.D. Funds of his another brother, Vipin Kumar Jain, was made. Appropriation from three brothers namely petitioner and his two brothers namely Pradeep Kumar Jain and Ashok Kumar Jain, is malicious, illegal and without jurisdiction. 12. A copy of Settlement Commission's order dated 09.01.1996 has also been placed on record to show that Sri Amrish Kumar Jain was grandson of Mrs. Moonga Devi who was sister of (Late) Giri Lal Jain. Settlement Commission held Smt. Moonga Devi and Amrish Kumar Jain as benamidar upto A.Y. 1973-74 but after reconstitution of firm, recognized them as genuine partners of firm, from A.Y. 1974-75. Settlement Commission also held, in para 20, that Giri Lal Jain died on 28.11.1973 and Amrish Kumar Jain was his benamidar till death of Giri Lal Jain and after his death, Amrish Kumar Jain and Smt. Moonga Devi became genuine partners of the firm. An application for rectification was filed before Settlement Commission but that was rejected on 19.09.2000. 13. Petitioner also moved an application under RTI Act, 2005 inquiring, whether any order of appropriation of outstanding dues of Amrish Kumar Jain was made in respect of sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal Mam Chand Co. as also in respect of various business in different names carried on by the firm M/s. Giri Lal Mam Chand Co. are being added back subject to necessary modification under Section 35 of the W. Tax Act, 1957 after the issues are settled by Settlement Commission. S.N. Particulars of Wealth 1970-71 1971-72 1972-73 1973-74 1974-75 1 Capital in: M/s. Giri Lal Mam Chand Co. as per B/Sheet 145192 146193 69527 97390 97142 2 M/s. Pathak Bros., As per B/Sheet, 50% 12997 13550 15271 17115 18980 3 Secret Capital in, M/s. Pathak Bros., 15% 391266 391266 391266 391266 391266 4 Capital as per, B/Sheet in the Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Brawn Laboratories Ltd., 4/4B Asaf Ali Road, Delhi; hence recovery could have been made from his property but in an illegal manner it has been appropriated from P.D. A/c of petitioner which is without any authority of law. It is also urged that observations made by CCIT are based on misreading of Settlement Commission's order and impugned order dated 17.08.2011 passed by CCIT is patently illegal. 19. Respondents have filed a counter affidavit as well as supplementary counter affidavit. In the counter affidavit it is said that there was a firm M/s. Mamchand Giri Lal, Bijnor constituted of (Late) Giri Lal Jain and S.D. Jain (father in law of Giri Lal Jain). The firm came into existence in 1951. It was reconstituted w.e.f. 01.05.1966 as M/s. Girilal Mamchand and Co., having following partners: I. Giri Lal Jain (Late) II. S.D. Jain (father in law of Giri Lal Jain) III. Smt. Moonga Devi Jain (sister of Giri Lal Jain) IV. Amrish Kumar Jain (minor grandson of Smt. Moonga Devi Jain) 20. Settlement Commission in the order dated 09.01.1996 held that right from beginning of firm, from 01.05.1966, Smt. Moonga Devi and Amrish Kumar Jain were benamidars of (Late) Giri Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1973-74 8,318/- 11/01/89 1973-74 8,31,800/- 11/01/89 1974-75 11,675/- 24/03/86 1974-75 3,33,871/- 11/01/89 1974-75 8,339/- 11/01/89 1974-75 8,33,900/- 11/01/89 22. It has also placed on record, letter dated 05.01.2005 issued by Deputy Commissioner, Income Tax, Circle-1, Ghaziabad (hereinafter to be referred as 'DCIT, Ghaziabad') which is addressed to Deputy Commissioner of Income Tax, Range-1, Ghaziabad for appropriation of cash seized, towards arrears demand of M/s. Giri Lal Mamchand. It reads as under: Sub:Appropriation of cash seized towards arrear demand in the case of M/s. Giri Lal Mam Chand Group of Cases Regarding - Kindly refer to this office letter of even no., dated 03.01.2005 on the above subject. 2. In continuation of my earlier letter dt. 03.01.2005 referred to above, I would request you t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter affidavit is patently false with regard to order of Settlement Commission. It held Amrish Kumar Jain, Benamidar of (Late) Giri Lal Jain for a limited number of years and that too, only under Income Tax Act and not Wealth Tax Act. It is further said that going by the Settlement Commission's order, since Smt. Moonga Devi Jain and Amrish Kumar Jain were held benamidars of (late) Sri Giri Lal Jain, till his death i.e. 28.11.1973, wealth-tax of Amrish Kumar Jain for A.Y. 1974-75 ought to have been completed in his personal capacity and not Benamidar of (Late) Giri Lal Jain. Further more, not admitting, it is said that wealth-tax demand on Amrish Kumar Jain for A.Y.s 1970-71 to 1973-74, even if, could have been recovered from the assets of (late) Giri Lal Jain, demand of A.Y. 1974-75 was not recoverable from assets of (late) Giri Lal Jain. It is said that even Giri Lal Jain was not responsible for payment of Wealth Tax liability of Amrish Kumar Jain. The wealth-tax demand of Amrish Kumar Jain was created on 24.03.1986 and 11.01.1989 but at no point of time petitioner was ever asked to pay the same for the reason that respondents knew that petitioner was not liable to satisfy t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners, it stood dissolved on that date nor petitioner. The reconstituted firm had three partners namely Sri S.D. Jain, Smt. Moonga Devi Jain and Sri Amrish Kumar Jain. Two of them i.e. S.D. Jain and Smt. Moonga Devi Jain also died on 12.05.1974 and 30.10.1978. Therefore, existing firm dissolved and may be reconstituted subsequently with the remaining partners or became a proprietorship firm after death of Smt. Moonga Devi Jain. In 1982, when application was filed, Firm at the best was having only one Partner alive thus become Proprietorship. It is not the case of respondents that petitioner or any of his brothers was a party before Settlement Commission when application dated 20.09.1982 was filed or that any notice was given to him or his brothers or they were heard. (Late) Girilal Jain obviously having died on 20.11.1973, had no occasion to participate in any proceeding thereafter. Neither any liability could have been saddled upon (Late) Girilal Jain, which was not already created and finalized nor without giving any opportunity of hearing to the petitioner, the alleged liability of Girilal Jain, created subsequently in his absence, can be saddled upon the petitioner. 33. Wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 09.01.1996 passed by Settlement Commission is on record as Annexure No. 11 to writ petition. The entire order no where shows that petitioner or any of his brothers, in any manner, were party in proceedings before Settlement Commission or had any opportunity of hearing. 36. In the counter affidavit, the defence taken is that liability of wealth-tax of Amrish Kumar Jain was appropriated from cash seized during search operation conducted at petitioner's premises on 04.10.2004. Settlement Commission's order relates to only income tax. No order of Settlement Commission relating to wealthtax has been placed on record along with counter affidavit or supplementary counter affidavit. All the documents appended as Annexure S.C.A.-1 to supplementary counter affidavit also relate to only income-tax demand raised from Sri Amrish Kumar Jain C/o M/s. Girilal Mamchand Co. 37. Respondents have also not shown anywhere by placing any material that petitioner succeeded or inherited any estate from (Late) Giri Lal Jain and that be so, what is the quantum of amount or the extent thereof. It is in this backdrop we have to judge correctness of action of respondents in appropriation of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apable to meet liability. Meaning thereby, legal representative's liability is confined to the extent, Estate has been succeeded by him and not beyond that. 41. Section 159 also makes it clear that proceedings shall be initiated against legal representative in the same manner as it could have been against deceased-assessee, but if that is so, like deceased assessee, legal representative(s) was/were also entitled to be heard before finalization of liability, after death of deceasedassessee. 42. Parimateria provision in Section 24-B existed in earlier statute in the Income Tax Act, 1922 (hereinafter to be referred as 'Act, 1922'). It came to be considered by a three Judges Bench in N. Shroff 1963 (48) ITR (SC) 59, wherein dispute relates to A.Y.s 1950-51, 1951-52, 1952-53, 1953-54 and 1954-55. In a firm of Solicitors there were three partners namely Amarchand N. Shroff, Mangaldas and Hiralal. Amarchand died on 07.07.1949. Partnership of solicitor firm then carried on by remaining two partners namely Mangaldas and Hiralal upto 30.11.1949. On December 1, 1949, Ramesh, son of Amarchand having qualified to become a solicitor, joined the firm as third partner. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount to the extent of estate, as the estate was liable to tax on the amounts received by heirs and legal representatives just as the deceased, Amarchand, would have been, had he not died. Court said that reading a particular clause of Section to be read together. Section 24-B is restricted to the income received by deceased person before his death and to the income received after his death by his heirs and legal representatives, in the previous year and which had not been assessed but would have been assessed as income received by him, if death had not taken place. Section 24-B does not authorize levy of tax of receipts by legal representatives of a deceased person in the years of assessment succeeding year of account being the previous year in which such person died. Court held that income-tax is exigible in reference to a person's total income of the previous year. Assessee under Act, 1922 had ordinarily to be a living person and cannot be a dead person because his legal personality ceased on his death. By section 24-B, legal personality of a deceased person is extended for the duration of entire previous year in the course of which he died and therefore, income received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives of deceased assessee. It also held that if notice was already served upon assessee when he was alive, there may not be any requirement of any second notice. 46. In the context of Wealth-tax Act, this Court in Rameshwar considering Section 19 of Act, 1957, said that sub section (1) imposes liability to pay, created already upon a legal representative. Sub-Sections (2) and (3) of Section 19 deals with liability to assessment by issuing appropriate notice upon the heirs and legal representatives of deceased assessee. Court said that sub-section (1) is confined to liability to pay and not liability to assessment. Section 19(1) by itself does not create on legal representatives' liability to pay which was non existent till the date of death of deceased. In other words, if an order creating liability to pay under the Act had not been passed till the date of death of original assessee, sub-section (1) does not authorize creation of liability to pay on the legal representatives. It also held that legal representatives would not be liable for penalty since penalty proceedings under Section 18 cannot be initiated against a legal representative. Court also makes it very clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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